By on August 8, 2012

The grim reaper may not be at American Suzuki’s door step after all. We’ve learned ASMC is healthier, at least financially, than we thought. But, in order to be profitable last year, ASMC had to completely cut almost every non-essential (and some essential) function of their business.

American Suzuki has been very conservatively run since introducing its motorcycle line to North America. With the automotive division only selling 26,618 units last year in the US (that’s less than both Porsche and Land Rover) and margins on those vehicles – all imported from outside North America, except for the Equator – being razor thin, it was clear as day serious cuts needed to be made if coming out of the year in the black was the main goal.

Public Relations? What Public Relations?

As we mentioned in an earlier Suzuki Death Watch article, Melissa Fujimoto is currently fielding media requests after the departure of PR veteren Jeff Holland. Before her media wrangling duties, Fujimoto spent around 10 years with promotions in an administrative role at ASMC. In 2011, all promotions activities were cancelled, leaving Fujimoto without a portfolio. So, instead of releasing the long-term, loyal employee, they made the logical choice and moved her on to other duties.

Those other duties, while including media relations, are mainly as secretary for ASMC President Seiichi Maruyama.

This may seem odd, but it makes sense when you realize ASMC’s current position. There are no plans to release any new product in the next 12-18 months, save facelifts for the Grand Vitara and SX4, so there are not a ton of media requests. Most current PR duties include reporting monthly sales and managing the press fleet, which can easily be managed by someone whose background is an administrative role in promotions.

ASMC still outsources other PR and marketing duties to Paine PR.

Auto Shows? What Auto Shows?

Before last year, ASMC participated in 66 auto shows. That number has been cut down to four. With no new product in the wings, going to extra auto shows is just an added marketing expense that isn’t needed. In some ways, it is a smart move to cut costs, yet it really takes the brand out of the public eye that may not live close to a Suzuki dealer.

The number of dealers is also dwindling. Current dealer development is arrested, with a number of franchise owners taking $50,000 buy outs to close their doors.

Everything Is Being Cut To The Bone

ASMC has lost top notch talent and has been selling very low volumes of cars with even lower margins. Yet, in 2011, ASMC made a profit and sent bonus checks to all its employees.

“People don’t understand how frugally (Suzuki) can run a car company,” said one source who spoke under condition of anonymity, “When employees of other automakers tell me how much they spend on things, it blows me away.”

Those profits come with a cost. Brand recognition is at an all time low. Product development is virtually non-existant. And, over time, more talent will leave for less stressful pastures. While the mood at Suzuki is currently said to be “normal”, its hard to ignore the deafening silence of a dearth of new product and a shrinking dealer network.

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20 Comments on “Suzuki Death Watch 5: How deep would you cut to make a profit?...”

  • avatar

    Their Facebook page seems to locked down prevent comments since
    yeserday. That’s weird because they have a car wash poll on right now, but no way to comment.

  • avatar

    Can someone show me an example of a company that survives, much less thrive, by pulling back and retreating/cutting costs? It seems that the usual result of such a move is the eventual death of the company.

    • 0 avatar
      Mark Stevenson

      It’s a “life support” move until they can get some new product in the pipeline, I think.

    • 0 avatar

      Um, Apple Computer in the 1990’s? They cut product and slashed staff. Seems to have worked out OK in the long run.

      Sometimes you have to stop the bleeding before you can heal the patient.

      • 0 avatar

        That’s actually a great analogy.

      • 0 avatar

        Apple is a pretty bad example for that unless Suzuki has a Steve Jobs hanging out somewhere ready to ride in and take over.

      • 0 avatar

        If Apple had not stopped the bleeding by slashing expenses/people/products they would have died before Steve Jobs could bring them back to health.

        I think the analogy works.

      • 0 avatar

        “I think the analogy works.”

        In this case, it doesn’t, since there is no MacIntosh, iTunes or iPhone to bring in future revenue.

        The auto business is largely a matter of grow, niche or die. If you aren’t growing, then you had better have a good niche. If you don’t have either of these things, then you’re going to die.

        Suzuki has neither in the US market. It is strong in India, but not here. With stronger competitors and insufficient funding to launch an aggressive growth strategy, it makes no sense for them to stay here.

      • 0 avatar

        “In this case, it doesn’t, since there is no MacIntosh, iTunes or iPhone to bring in future revenue.”

        Yes, but in 1994, we didn’t know that Apple had iTunes or iPhone in the wings. It’s likely Apple didn’t know then either. In the ’90s, I’d bet people were saying Apple doesn’t have any new product on the horizon, too.

        While I can agree with the “no Steve Jobbs” thing, Suzuki, as a whole corporation, is still quite profitable. The real question is will the company spend the dough to get new, innovative, and appealing product into the U.S. market, or will it simply write the U.S. off and focus on other areas? Then again, if they’re turning a profit in the U.S. (bare-bones operation and all), why leave?

      • 0 avatar

        “Then again, if they’re turning a profit in the U.S. (bare-bones operation and all), why leave?”

        Last year, Suzuki generated an operating loss in North America.

        A losing operation with no chance of reversal is a distraction, which makes it a waste of time. Suzuki is too small to survive in a market with the fierce competition of the US, so staying here is a poor use of management effort and money that could be better deployed elsewhere. He who prioritizes everything is prioritizing nothing.

      • 0 avatar
        Mark Stevenson

        Pch101 – An operating loss in North America is not the same as an operating loss of ASMC’s Automotive Division.

      • 0 avatar

        “An operating loss in North America is not the same as an operating loss of ASMC’s Automotive Division.”

        In FY 2011, 89% of Suzuki’s total revenues came from automotive.

        It’s a pretty sure bet that if Suzuki is losing money in North America, then it’s losing it on automotive.

        Given the lack of sales, losses are to be expected. There is no reason to believe that they should be able to support their fixed costs with such meager sales.

    • 0 avatar
      Steve S.

      “A man who stops advertising to save money is like a man who stops a clock to save time.” – Henry Ford

  • avatar

    Well, I kind of have a soft spot in my heart for Suzuki. Perhaps it is because of very good experience I had with their cars. Good to know that their financial position is not to severe and they do not waste money. Hopping to own Kasazhi in a few years, when time is right.

  • avatar

    Perhaps Suzuki intends to survive like Checker Motor Co., which limped through the 1980s selling a few taxicabs and doing metal stamping for GM. Surprisingly, Checker did not file for bankruptcy until 2009.

    • 0 avatar

      That’s where I’d put my money, i.e., Suzuki is hoping that GM will throw them a bone or two to keep them going.

      The only problem with that scenario is GM is having a tough enough time keeping themselves afloat, let alone helping anyone else stay in business.

    • 0 avatar

      You mention of Checker intrigued me, according to the Wiki it looks like it may have been Madoff that actually did them in, not the GM bankruptcy. if Madoff had not happened the CEO (and son of the founder) may have had the capital to keep it afloat.

      The company had net sales of $61 million in 2008 and projected 2009 sales of only $34.5 million, a decline of 43%. During the summer of 2008, Checker employed about 340 workers.

      While the US economy was in full recession, Checker Motors CEO David Markin fell victim to to the Ponzi scheme started and run by Bernie Madoff. David Markin’s name appears five times on the official list of Madoff victims. One address on the list was 2016 North Pitcher Street, Kalamazoo, the same address as Checker Motors Corp.

      On January 16, 2009, the 87-year-old Kalamazoo company filed in U.S. Bankruptcy Court in Grand Rapids, Michigan. Escalating raw material prices and dwindling sales for their customers’ products were cited as the main reasons for the filing, but another reason was labor costs.

    • 0 avatar

      Checker stopped building cabs in 1982, not the whole decade. They were a parts suplier afterwards.

      If a year 2008 Checker cab is found post pics!

    • 0 avatar

      Checker also dabbled in a number of other businesses – International Controls, Great Dane trailers, Yellow Cab, American Country Insurance, and some others. I believe the Markin family may still own all or part of some of Checker’s affiliated businesses.

      Diversification through acquisition is another option for American Suzuki to survive. It also worked for Studebaker, which survived until 1979, when it was absorbed by McGraw-Edison.

      Of course, the big thing that makes this different is that Checker and Studebaker were American automakers that collapsed in the American market. Suzuki is a Japanese automaker that is struggling on the American market, but that is still quite strong in most other places, including at home. They really can afford to fail here, to a certain extent, and let the rest of the world carry them.

  • avatar

    Why not rebadge other Japanese models and sell them as Suzuki in US. E.g. let them rebadge Nissan Altima as Suzuki and in exchange let Nissan sell pianos and other musical instruments under their badge. As far as I know it is normal practice in Japan. IIRC Suziku were rebadged Daewoos until recently. Then they tried to sell some obscure model based on GM short wheelbase platform which was praised by journalists.

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